Internship Report

Nestl Pakistan Ltd.

BBA Program
Fall 2016

Submitted to:
Dr. Irfan Saleem

Submitted by:

SARAH JAVED L1S13BBAM0148

Email: sarah.javed@ucp.edu.pk
Contents
Industry Profile: .............................................................................................................................. 3
Organizational Structure of NESTLE: ............................................................................................ 4
Company Profile: ............................................................................................................................ 6
Nestl Pakistan takes great pride in its commitment to excellence in product quality and taste. ... 7
Company Brands:............................................................................................................................ 7
Vision: ............................................................................................................................................. 9
................................................................................................................................................... 10
Mission:......................................................................................................................................... 10
Creating Shared Value (CSV) and Community Work:............................................................. 11
SUPPLY CHAIN: ......................................................................................................................... 11
CORPORATE PROCUREMENT: ............................................................................................... 12
Mission:..................................................................................................................................... 13
Strategy: .................................................................................................................................... 13
ACTIVITIES AND TASKS PERFORMED: ............................................................................... 18
SWOT ANALYSIS: ..................................................................................................................... 20
Identification of Plausible Problems: ............................................................................................ 22
Recommendations for a suitable course of action: ....................................................................... 23
Bibliography ................................................................................................................................. 25

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Industry Profile:

FMCG industry also commonly called, the Consumer Goods Industry mainly deals with the
production, marketing and placement of consumer goods. Fast Moving chain goods generally
refer to those goods that are consumed by the consumers regularly. The FMCG Industry is
mainly engaged in sourcing, marketing, financing, selling, general management and production.

Industry Economy:

Just because of having a diverse range of product offerings, and a huge customer base, the
FMCG economy is a big economy exhibiting huge sums of money being circulated each day.

As being a highly competitive market, the industry seems to have minimal price differences and
price elasticity among the brands.

The merits of FMCG industry that makes it a potential choice for investors is low operational
cost, strong distributional networks and population growth with new and more customers using
consumer gods each day.

The FMCG Sector in Pakistan is considered to be a safe heaven by investors everywhere in the
world. It has the boom in the country right now, and this economy is quite immune to the macro
level shocks as well. We can see slow and steady growth up the market looking at the historic
data and figures.

Despite of the challenges such as political instability and energy crisis, Pakistan has paved its
road to growth in the FMCG Sector. Not only the Multi-national firms like Nestle, Proctor n 3
Gamble and Coca Cola but a few local firms have also merged on board recently.

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Every year Pakistans FMCG market grows by a double digit ratio, so it is a rapidly growing
industry with more and more brands are taking over the market everyday. The considerable
growth in the FMCG market after 2010 is mainly because of the following reasons:

1. People have gained exposure to the international trade and business in the past few years
due to technological advancement and globalization. This has increased the ratio of
SMES in Pakistan.
2. International Modern trade in terms of a global perspective.

This industry can be mainly divided into two categories:

Food and Beverages
Non Food

Typically, theres a 40/60 ratio in them.

The consumers of Pakistan are less experiential and are more prone to trying out new and
different products. In the food sector, consumers tend to be more taste conscious though.

Organizational Structure of NESTLE:

Nestle Pakistan has a flat matrix organizational structure. Its departments follow a division
product wise and function wise. Within those functions there are specific product departments,
and all the product departments follow certain functional departments.

There is direct and indirect reporting between the department heads and their subordinates so the
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span of control is wide. Each employee reports two or more departments directly or indirectly.

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The reporting to Nestle Head Office in Switzerland is done by the Manger Director and he get
guidance from there.

Just under the Managing director the following departments lie:

1. Business Executive Managers

2. Head of Human Resources
3. Head of Head of Supply Chain
4. Head of Sales Department
5. Head of Supply Chain
6. Head of food services Department
7. Head of Technical Department
8. Head of Finance Department
9. Head of Corporate and Legal Department

The following departments report indirectly to the Managing Director:

1. Head of Nutrition
2. Head of Waters
3. UNDP Projects

Out of these the first two departments report directly to the Head Office and the UNDP
department comes falls under the United Nations.

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Company Profile:

Nestl Pakistan is the leading Nutrition, Health and Wellness Company in the Country.
Nestl Pakistan is headquartered in Lahore, with four production facilities across the country.
Factories in Sheikhupura and Kabirwala are multi-product, whereas the ones in Islamabad and
Karachi are water factories. The factory in Kabirwala is the largest milk intake plant in the
Nestl world.

Nestl Pakistan Ltd. is a subsidiary of Nestl S.A., a company based in Vevey,

Switzerland. Registered on the Pakistan Stock Exchange (PSE), the company has been operating 6
in Pakistan since 1988 under a joint venture with Milk Pak Ltd, whose management we took
over in 1992. For the last several years, Nestl Pakistan has been consistently placed among the

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top companies of the PSE. Companys strategy is guided by Nestls Corporate Business
Principles, which are in line with internationally accepted norms and practices.

Nestl Pakistan takes great pride in its commitment to excellence in product

quality and taste.

Through its effective marketing and vast sales distribution network throughout the
country, it ensures that its products are made available to consumers whenever, wherever and
however. Nestl Pakistan operates in many ways but people, products and brands are the main
flag bearers of the Companys image.

Nestl Pakistan now operates the biggest milk collection system in Pakistan. Currently,
Nestl Pakistan collects milk from an estimated 190,000 farmers spread over 146,000 sq Kms in
the Province of Punjab and Sindh.

Our companys strategy is guided by Nestls Corporate Business Principles, which are
in line with internationally accepted norms and practices. (Nestle, 2016)

Company Brands:
The companys brands include the following categories:

1. Ambient Diary
2. Chilled Diary
3. Juices
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4. Bottled Water
5. Culinary and Food
6. Baby Food
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 7. Breakfast Cereals
8. Coffee
9. Confectionery

Classification of Products:

Ambient Diary:
In the ambient diary, the company manufactures products such as Nestle Bunyad, Milo, Milk
Pak, Milk Pak Cream, Nestle Acticol, Nestle Everyday, Nesvita Calcium Plus and Nido.

Chilled Diary:

Within the chilled diary, it produces Nestle Yogurt, Nestle MilkPak Yogurt, Nestle Actiplus
Yogurt, Nestle Zeera Raita and Nestle Podina Raita.

Juices:

In the juices it has Nestle Fruita Vitals which is a little high price premium brand with flavors
such as apple, mango, guava, orange, pomegranate Pineapple, Peach, Pina Colada and Mint
margarita.

And Nesfruta comes in apple and pineapple flavors.

Bottled Water:
Nestle bottled water comes under the brand name of Pure Life ehich is available in the market
with four different packaging sizes.

Culinary and Food:

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Within the culinary and food, it makes Maggi which are the yummiest noodles, liked by the kids
a lot. The flavors include Chatkhara, Chicken and Chatpata.

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 Baby Food:

In the baby Food Nestle provides Cerelac for the infants of different age groups.

Vision:
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Nestls vision is to be the globally recognized leading Nutrition, Health and Wellness (NHW)
Company.

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In particular, we envision:
Leading a dynamic, passionate and professional workforce, proud of our heritage and positive
about the future.
Meeting the nutritional needs of consumers of all ages from infancy to old age, from nutrition
to pleasure, through an innovative portfolio of branded food and beverage products of the highest
quality.

Delivering shareholder value through profitable long-term growth, while continuing to play a
significant and responsible role in the social, economic, and environmental sectors of Pakistan.
(Nestle, 2016, pp. 2-3)

Mission: 10

A better and healthier future for all Pakistanis.

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Creating Shared Value (CSV) and Community Work:

A successful company that creates value for its shareholders must also create value for the
society in order to be sustainable in the longer run. At Nestl, this is called Creating Shared
Value (CSV).

Given the aim of the company to be the worlds leading Nutrition, Health and Wellness
Company, Nestl has identified the following focus areas where it can optimize the creation of
shared value:

Nutrition
Water
Environmental Sustainability
Rural Development
Our People

SUPPLY CHAIN:

Nestle Supply Chain continues to provide a competitive edge to the company by

enhancing operational and capital efficiency and sourcing at the most optimum rates. In the
whole supply chain activities, safety is the first priority of the team with continuous focus and
enhanced use of technology. Challenges faced by supply chain personnel include reducing the
fatality rate in transport operations, sourcing at the lowest possible costs etc. In the local
surroundings, considering the infrastructure and cultural limitations Nestle supply chain strives
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to achieve remarkable results. (Nestle, 2016, pp. 38-40)

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CORPORATE PROCUREMENT:

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 My internship was based in the procurement department of Nestle which is within the
Supply Chain department. This department is responsible for the sourcing and acquisition of
material and services required for the company processes.

Mission:

Enabling the business to reignite growth.

Strategy:

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THE PROCUREMENT PROCESS:

Step 1:

The procurement process starts with a purchase requisition that is sent to the supplier whenever
there is a demand for a service or material. The demand schedule consists of the specifications of
the required material or service, time period of delivery and the budget.

Step 2: 14
The second step is of the vendor selection. Vendor is selected by procurement buyer that
performs the sourcing of the required material or service in consideration with a predefined

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vendor selection criterion. After that a RFQ (Request for Quotation) is generated followed by a
detailed contractual coverage of the Purchase Order.

Step 3:

Prior to the purchase of the service/material, authorization is necessary. So, the procurement
team conducts authorization of the vendor details, specifications of the required service/material,
delivery time, price and the terms and conditions of the purchase.

Step 4:

After authorization, delivery of service/material takes place. After collecting the required order,
quality and quantity checks are conducted and delivery receipts are checked.

Step 5:

After authorization, the accounts payable team conducts the posting of invoice. It includes
issuing Purchase Order No, Goods Receipt No, Quantity and Value of the service/material
purchased.

Step 6:

At the end of the purchase, payment is released according to the payment terms and conditions in
the purchase contract.

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PROCUREMENT STRUCTURE:

The structure of procurement department is divided into three main sub-divisions including:

Category management
Operations
Compliance/Excellence

In the Category management, three procurement managers look after the procurement of
direct materials, Services and Indirect materials (technical and corporate). Direct materials
mainly refer to the raw materials that are used for the production of the food and drinks prepared
at Nestle. Services and indirect materials refer to the goods and services involved in the
execution of company processes just like machinery and transport services and media/marketing 16
services etc.

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 Under each of these procurement managers, four lead procurement specialists are working
that are involved into activities like business partnering, designing the key strategies and
forecasting, contract negotiations and management with the suppliers and the overall supplier
relationship management.

The operations team consists of an OBSS Manager who has to control the operational buying
and shared services. Under OBSS manager, there are ten procurement executives. The roles ad
responsibilities of procurement executives include purchase order creation, contract execution
and delivery management. It also looks after the supplier performance management and
evaluating their services.

There is an imports manager as well, who leads a team of four procurement executives that
look after the imports. Imports include the procured materials from the countries worldwide
including North America, China, Middle East, and European Union.

The compliance and excellence team consists of a Procurement Controller and Business
Excellence manager. This team looks after the quality of the processes, and continuous
improvement in the whole supply chain activities. They are responsible for driving down the cost
of non quality and promote execution timelines and facilitate efficient utilization of committed
resources.

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ACTIVITIES AND TASKS PERFORMED:
Department:

My internship was based in the corporate procurement, within the Supply Chain department of
Nestl at their Head Office in Lahore, Pakistan. I worked under the supervision of Business

Excellence Manager in the procurement department. I was appointed as a Procurement

Associate Intern and the tenure of my internship was of six weeks.

Orientation:
In the first week, I was given an effective orientation of the departmental functions and the
nature of the work. I was then informed about the project I had to undertake during my
internship.

Goals were clearly defined and I was given a comprehensive briefing of the outcomes to be
achieved within the given timeline.

Project:

I was assigned the project of making a database and consolidating the SRs, SOPs and
OPLs of the Procurement department that ensure business excellence, and contribute towards
Continuous Improvement. SRs are the Standard Routines of the company that are a standard set
of rules to perform a certain task, e.g. to create purchase order(PO Creation) has a whole process
that involves a series of steps to be followed which will be me mentioned in the Standard
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Routine.

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 Similarly, SOPs are the Standard Operating Procedures that are followed by the employees
for performing certain tasks. And OPLs are the one point lessons which are the short
instructions mainly for the purpose of promoting the safety of employees. E.g. keeping the clips
of DOR (Daily operational Review)Boards closed while working on the KPI Boards. This
ensures employee safety as working on DOR boards while clips are open may cause injury or
damage clothes.

Consolidation:

My task was to consolidate all these SRs, OPLs, SOPs and GSTDs after collecting them
from various employees that had created them individually and create a database of them in Ms.
Excel. I managed to compile and arrange all the documents and placed them into separate files to
be kept as a hard copy record and then scanned them as well. All the scanned documents were
then emailed to the Business Excellence Manager to be uploaded on the portal, for direct access
to the employees.

Other than the hard copy, I also created a database of these documents which contained all
the necessary details of them. I was also advised to make improvements in these documents
wherever required, by discussing the relevant courses of action with the concerned employees
who dealt with those tasks on a daily basis.

Key Learning:

My key learning during the completion of this project was as follows:

The purpose of making OPLs, SOPs, GSTDs and SRs and their usage and application
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inside a department and its operations.
The importance and impact they have towards achieving business excellence and how
they contribute towards improvement of task performance.
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 An understanding of the business excellence function within a department

Other than the project I completed, I also gained useful insights regarding the process flow
at Supply Chain and its sub departments such as procurement, customer services,
media/marketing and compliance.

Getting hands on experience in a multinational company and an opportunity to work with

highly trained professionals of Nestle has added a lot to my knowledge and skills. I consider it an
achievement.

SWOT ANALYSIS:

Strengths:

Nestle has always conspired to provide the best quality products to its customers. Over
the decades it has successfully shown consistent efforts to be recognized as the best food
provider and has built up its name in the world class companies.

Nestle is a brand centric company and has a strong brand image. It has a brad portfolio
wider than any other firm in the local context. It markets and sells some the well
recognized brands globally such as Kit Kat, Maggi, and Nescafe etc.

Moreover, Nestle is also a environment friendly company known for its shared value and
community work. It uses recyclable products and renewable source whenever possible.

Nestle has a hire to retire concept and it hires professionals to provide career growth and
job security. Due to which the employees are loyal and highly skilled at their roles. 20

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 Nestle has a strong Supply Chain function and a widespread distribution network across
the country.

Weaknesses:

The company has most of investments made in the fixed assets. Its huge portion of the
capital is employed in machinery and other non-current assets. Due to which the
company cannot update its machinery and equipment very soon as a new technology is
implemented.

It has certain constraints within the societal and legal framework in the local context, due
to which the company does not has an ability to introduce new technologies into its
operations locally. Global practices are yet to come in Pakistan. It also faces the countrys
economic and political conditions as a barrier to development.

Nestle is resistant to change. It has not implemented the new technologies because of it
standardized policies and processes. The company seeks to show less adaptability to
change.

Opportunities:

The market is experiencing a rapid growth in Ready-to-drink and Ready-to-drink Coffee

markets. Nestle has its Nestea and Nescafe in the RTD brands. But it can also acquire any
smaller brands having the potential to be sold. Or can also launch new flavors of RTDs.

As more and more customers are becoming aware of sustainable practices and wish to
consume products that come from an ethically grown and sustainable process. Nestle
should start improving its sourcing from sustainable plantations and farms. 21

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Threats:
The competitive rivalry is the key threat to Nestle. As there are more and more small
companies entering the packaged food and beverage industry the company faces
increased competition. Small companies also sell at lower prices, product variety and
convenience which can be some crucial factors aggravating the competition.

Scarcity of water is a threat to Nestle. The beverages of Nestle constitute a huge portion
of its market share and water is used in their production. Due to the change in climate
conditions globally, overexploitation of the resources and increase in the population and
the inefficient management of waste water, it is becoming a scarce resource. The
company can face increased production costs that would lower its profitability.

Identification of Plausible Problems:

I have looked into the Procurement and Supply Chain as an internee for a few weeks, but I have
figured out a few issues that exist within the department.
Enlisted as follows:

1. Less use of technological tools and software:

As procurement an Supply Chain are the business functions that are highly related to
sourcing and buying. The aim of the department is to minimize the total spend and buy at the
optimal costs. This involves looking through a long term approach.

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There are certain tools and soft wares that aid in planning and meeting the long term
procurement objectives. In short, they give you a good picture of the scenario, which includes

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your supplier mix, your buying categories and other significant factors. At times, the software
help you divide your orders from the suppliers in such a way to keep all of them engaged. The
optimal division of suppliers to keep aligned with long term demand and supply ratio is just one
example of software utilization though.

But Nestle is not acquiring and using such useful tools to get better equipped with them and
aid in forecasting long term possibilities.

Currently, the company is using a few modules of SAP. Using the advanced modules can be
a profitable decision.

2. Country- specific Limitations:

There are certain limitations that the company has to face because of the local context and the
legal framework. Due to which the company is not able to pursue certain methods in its business
process that would have boosted up its profitability.

Recommendations for a suitable course of action:

I would like to recommend the following suitable courses of actions that would help add value
into the company processes:

1. E-Invoicing:

One such example is of E-Invoicing that involves the electronic invoices which are cost and
time savvy and that automate the process. They also help in better compliance. Manual receipts
and invoices create hassle more frequently and consume a lot of time. But Pakistan has not yet
permitted E-Invoicing due to which the company still relies on manual work. 23

There are many other limitations as well.

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 2. E- Catalogues; Supplier Facing Supply Chain:

There are a few suppliers with whom the company has to maintain excellent relationships for
certain reasons.
For these suppliers the company makes goals to share certain benefits with them and
optimize their profits as well. This edge goes to the suppliers for crucial reasons. Some are
giving the best quality, while others have monotony in the market and some are the long term
partners of the company.
In this specific process, the company sends a catalogues annually to the suppliers containing
all the information regarding he cost of the goods which in this case mainly are the tail items like
stationery and other items the company has to procure in its everyday processes. This helps the
supplier give an edge as he gets an idea of an annual sale and the company saves its time of
negotiations.
In Pakistan this concept is yet to come, because of which the company has to go an extra
mile in making healthy relationships.

3. VMI Vendor Managed Inventory:

By introducing this innovative tool in the company processes, the vendors get an idea of the
inventory status of the company and the company gets a full fledge view of the vendors
warehouse. And both the parties can benefit saving their time and cost.

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Bibliography
Nestle. (2016). Mangement Report. Lahore, Pakistan.

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